Build, Baby, Build A Plan To Lower Housing Costs For All

Housing Costs

Introduction

Across the United States, a single frustration unites renters, first-time buyers, and long-time homeowners: housing costs are simply too high. According to the document, roughly one-third of all American households and half of all renters are now “housing cost burdened,” spending more than 30% of their income on rent or mortgage payments. Since the start of the pandemic, home prices have risen nearly 55%, while rents have climbed more than 30% nationwide. The median age of a first-time homebuyer has reached 40 the highest on record, up from 31 just a decade ago. For many, owning a home feels like an impossible dream.

The root cause, the authors argue, is not just inflation or greedy landlords, but a fundamental housing supply crisis. The United States is simply not building enough homes. After the Great Recession, home construction fell dramatically and has never fully recovered. Today, the nation faces a deficit of roughly 2 million homes. This gap includes “pent-up households” (over 1 million families that would form their own homes if affordable housing costs options existed) plus units needed to restore normal vacancy rates.

This summary unpacks the Center for American Progress (CAP) plan to close that gap within five years, at an estimated cost of $95 billion. The plan rests on three pillars:

  1. Take down barriers that make it harder to build homes.

  2. Build more affordable homes at lower housing costs.

  3. Protect consumers and lower other housing-related expenses.

Throughout, the document emphasizes that demand-side subsidies (like rental assistance) work best only when housing supply is elastic. In supply-constrained markets, subsidies just push prices higher. Thus, the core solution is to build, baby, build.

We Are Not Building Enough Homes in America

The report opens with stark data. Housing construction completion rates per 100,000 people have remained below historical averages since the 2010s. Median home prices relative to incomes have climbed from about 4:1 in the mid-1980s to 5:1 today. Rent-to-income ratios are at their highest since 1980.

Critically, there is a well-established link between housing supply and affordability. One analysis covering 2017–2024 found that a 10% increase in a market’s housing supply correlated with a 5% decrease in rent growth, with the steepest declines in older, less expensive units. Other studies show that new apartment buildings reduce rents in nearby units compared to areas farther away.

The document cites Moody’s Analytics and the Urban Institute to pinpoint a current housing supply deficit of about 2 million homes. This includes 1.2 million “pent-up households” that would have formed if housing were more affordable, plus 800,000 homes needed to return to historical vacancy rates. The biggest shortfall occurs in “middle-income” tracts (80–120% of area median income).

How the Trump Administration Worsened the Crisis

The report is critical of Trump-era policies. It notes that broad tariffs on lumber, steel, gypsum, kitchen cabinets, and bathroom vanities will add roughly $135 billion to residential construction housing costs over five years. Immigration enforcement has also hurt the construction workforce, where immigrants make up more than one-quarter of workers, and even higher shares in skilled trades facing acute shortages. Nearly one-third of construction firms report being affected by immigration enforcement, and 10% have lost workers.

Bad Local Policies Are a Big Problem

Land-use restrictions are a major driver of the housing supply gap. About 75% of land in American cities is zoned exclusively for single-family homes. Many communities restrict manufactured housing costs or impose minimum lot sizes, height limits, parking ratios, and setbacks. While fixing these local policies is necessary, the report argues it is not sufficient on its own. Federal action is required to unlock large-scale production.

A Plan to Quickly Build More Housing and Lower Housing Costs

The CAP plan is divided into three strategic buckets, each with specific, actionable proposals.

Pillar 1: Take Down Barriers That Make It Harder to Build Homes

Rent Relief for Reform (R3) Program

The flagship proposal is the R3 program, a three-year effort to accelerate housing supply in the places that need it most. The federal government would designate Housing Cost Crisis Zones (HCCZs) jurisdictions where rents are exceptionally high or rising rapidly and where supply has failed to keep pace with demand.

In these zones, the program offers both a carrot and a stick:

HUD would enter into “affordability contracts” with HCCZs, setting housing supply targets based on local shortages, growth potential, and density. By the end of year one, progress is measured by concrete steps to remove barriers. In years two and three, it is measured by permitted or completed units.

For a typical renter in a high-cost area, the R3 program could save $650–$960 per year (depending on the county) when combined with savings from reduced junk fees and anti-collusion measures. For example, in Los Angeles County, where 47% of households are cost-burdened and median two-bedroom rent is $2,866 annual savings could reach $640–$860.

In addition to R3, the report supports competitive grants (building on the bipartisan ROAD to Housing Act) to incentivize state and local reforms, including investments in roads, transit, sewer systems, and schools to manage the impacts of greater density.

Pillar 2: Build More Affordable Homes at a Lower Cost

Drive Down Construction Costs by Scaling Up Factory-Built Homes

One of the most striking facts in the document: Between 1970 and 2020, U.S. construction labor productivity fell by more than 30%, even as overall economic productivity roughly doubled. The number of homes built per worker has been trending down since 1970.

To reverse this, CAP proposes scaling up factory-built homes (manufactured, modular, and panelized). These are built off-site in controlled environments, then transported and assembled. Despite being cost-effective, manufactured housing costs face local zoning barriers and financing challenges (buyers often rely on expensive chattel loans instead of traditional mortgages).

Key recommendations:

The report estimates that scaling factory-built homes could produce 600,000 new units over five years at a cost of $15 billion.

Invest in Programs That Build Middle-Class Homes at Lower Cost

Two additional financing mechanisms are highlighted:

  1. Neighborhood Homes Investment Act – A bipartisan tax credit to cover the gap between construction/rehabilitation housing costs and a home’s market value in distressed neighborhoods, making it financially feasible to build or renovate owner-occupied homes.

  2. Public revolving loan funds – Modeled on programs in Massachusetts, Michigan, and Montgomery County, MD. A public entity (land bank or development authority) provides lower-cost capital for construction, especially for projects that are permitted but stalled due to high financing costs. The public entity retains a controlling ownership stake, and rents recapitalize the fund. This approach could unlock roughly 500,000 units at a cost of $40 billion.

Currently, about 115,000 multifamily units are permitted but not started (up from 81,000 in 2019), representing a huge opportunity for rapid scale-up if lower-cost capital is provided.

Pillar 3: Protect Consumers and Lower Other Housing Costs

Exempt Building Materials from Tariffs

The Trump administration’s broad tariffs have added billions to construction costs. Exempting building materials would save an estimated $11,000 per new home and $135 billion over five years across all residential construction. It would also boost housing supply by reversing tariff-induced output declines of nearly 4%.

Prevent Misguided GSE Reforms That Raise Mortgage Rates

The document warns against ending Fannie Mae and Freddie Mac’s conservatorship through an IPO-like process that could raise mortgage rates by 0.2 to 0.8 percentage points. For a typical homebuyer, that translates to $500–$2,000 more per year. Any reform must maintain or improve current affordability.

Put Fannie and Freddie to Work to Speed Up Construction

Currently, the GSEs allow “single-close” construction-to-permanent loans but do not buy or securitize them until construction is complete. This forces lenders to hold the loan on their balance sheets, raising costs. CAP proposes allowing upfront purchase and securitization, modeled on renovation loan programs. This could reduce financing costs and increase lender participation in new construction, potentially adding 37,500 units.

Crack Down on Costly Frictions in Housing Transactions

Homebuyers pay over $2,000 on average for lender’s title insurance, yet only 3–5% of premiums are paid out in claims (compared to 70%+ for health or auto insurance). The Consumer Financial Protection Bureau (CFPB) should require lenders to cover these costs themselves. The Federal Housing Finance Agency (FHFA) should expand its pilot to waive title insurance on refinances.

Prevent Rent-Setting Software Collusion

Algorithmic rent-setting platforms that share pricing and supply data among landlords effectively enable collusion. A White House analysis found renters in buildings using such software pay over $800 more per year than those in non-participating buildings. CAP recommends federal legislation to ban this practice, along with agency action on properties they control.

Ensure Access to Affordable Home Insurance

Climate change is driving up premiums and causing insurers to exit high-risk areas. CAP proposes a federal reinsurance program to backstop state-run FAIR plans (insurers of last resort in 34 states and D.C.). Acceptance into the program would be contingent on state and insurer actions to improve resiliency and lower housing costs.

Eliminate Rental Junk Fees

Renters face surprise fees for applications (often $35–$75 per application, multiplied across multiple properties), mail sorting, and online rent payment. CAP proposes capping credit check fees at the actual cost (around $20) and allowing a single, reusable rental application. The Federal Trade Commission should broaden its junk fee rule to ban hidden lease fees.

Estimated Costs and Impacts

The total five-year cost of the plan is roughly $95 billion, broken down as:

A renter in a high-cost area could save about $1,000 per year from direct rent relief, supply-driven rent moderation, junk fee reduction, and anti-collusion measures. A first-time homebuyer could save roughly $24,000 on their first home through lower construction housing costs (from tariff exemptions), regulatory changes that increase housing supply and moderate price growth, lower insurance and title costs, and productivity gains from factory-built homes.

Conclusion: Closing the Gap

The document concludes that Americans face a deepening crisis of opportunity and economic mobility. Rising housing costs driven by a persistent housing supply gap are pushing families to their limit. Addressing this crisis demands bold, urgent action. The CAP plan provides a concrete roadmap: use federal incentives to unlock local reform, scale up factory-built homes and innovative financing, protect consumers from junk fees and price collusion, and remove tariff barriers that inflate construction housing costs.

By closing the 2-million-home gap within five years, the plan would not only lower housing costs for renters and buyers but also restore the dream of homeownership for a new generation. As the authors put it, we cannot subsidize our way out of a shortage. We must build, baby, build.

Also Read: “Women, Housing & Development: How Affordable Housing Impacts Female Empowerment In Pakistan”